State oil firms like BPCL, HPCL seeking to buy 266 crore litres of ethanol
State-run fossil fuel retailers have initiated a move to buy 266 crore litres of ethanol to blend with petrol and meet the 5 per cent blending norm. The purchase could ease pressure on the sugar industry which is grappling with excess production and low prices.
Bharat Petroleum Corp ( BPCL) has invited expression of interest online on behalf of state fuel retailers including Indian Oil Corporation (IOCL) and Hindustan Petroleum Corporation ( HPCL) for procurement of “denatured anhydrous ethanol” between December 2015 and November 2016, according to an advertisement.
A month ago, these companies had invited tenders for the maiden purchase of 850 million litres of biodiesel for mixing with diesel. The retail sale of biodiesel blended fuel has just been launched in four cities in the country.
With most major cities struggling with polluted air and related health issues, fossil fuel retailers have been mandated by the government to add cleaner biofuels to the petrol and diesel they sell, but their availability and pricing have been a hurdle. An increased consumption of local biofuels can help bring down the import bill for India, which meets 80 per cent of its crude oil requirement through imports.
The National Policy on Biofuels had earlier proposed a 20 per cent blending ratio for both biodiesel and ethanol by 2017, but the government has made only 5 per cent ethanol blending binding for fuel retailers while placing no compulsion with respect to biodiesel, primarily due to its limited availability. On average, 3 per cent ethanol blending has been achieved so far.
Ethanol is mainly derived from sugar extracts and its increased consumption can directly help the sugar industry. Biodiesel is produced mainly from vegetable or animal fat.
Four months ago, the government had removed a 12.36 per cent excise duty levied on ethanol supplied for blending with petrol and raised the import duty on sugar to 40 per cent from 25 per cent as part of strategy to support the domestic sugar industry.
The government has also fixed the minimum delivered price of ethanol in the range of Rs 48.50 to Rs.49.50 per litre, bringing in pricing certainty for suppliers, but a sharply falling crude oil can potentially turn ethanol into a difficult choice for fuel retailers.
